Finance Minister Bill English has welcomed news that the Australian Senate has passed legislation allowing New Zealanders returning home from Australia to bring their retirements savings with them.

It is expected the trans-Tasman portability of retirement savings will take effect from 1 July 2013.

“I acknowledge Australia’s support for this important next step in the Single Economic Market programme between our two countries,” Mr English says. “In particular, this will further help the free movement of labour between New Zealand and Australia and further strengthen our wider Closer Economic Relations agreement.”

Currently, Kiwis who work in Australia must contribute to an Australian complying superannuation fund. However, the savings are locked into the Australian scheme until the saver reaches retirement age.

Under the new rules, retirement savings from certain Australian superannuation funds will be able to be transferred into New Zealand KiwiSaver funds – and vice versa. New Zealanders bringing their savings home must put them into a KiwiSaver fund.

After negotiations were started by the previous government, Mr English signed an agreement with Australian Treasurer Wayne Swan in July 2009, which paved the way for the new super portability scheme. Legislation allowing this to happen was passed by New Zealand’s Parliament in September 2010.

Australia’s Tax Office has estimated that it holds about A$13 billion (NZ$16.6 billion) in “lost accounts” in the Australian superannuation system.

“We expect that much of this money could belong to New Zealanders who have returned home and these new rules will allow these funds to be brought back to New Zealand,” Mr English says.

Participation in the super portability scheme will be voluntary.

Key facts about the Super portability changes

• The transfer of retirement savings between the two countries will be exempt from entry and exit taxes. Under current tax laws, transferring savings from Australia to New Zealand may be regarded as a taxable dividend. The new rules will ensure this does not happen.

• KiwiSaver members moving from New Zealand to Australia will be able to retain any member tax credits if they transfer to an Australian scheme.

• KiwiSaver members will not be able to withdraw money transferred from Australia to help them buy their first home, but they can use the interest earned on those savings for this purpose.

• Retirement savings transferred from Australia into a New Zealand KiwiSaver scheme can be withdrawn when members reach the age of 60 as long as they have retired– as set out under Australian scheme rules. KiwiSaver savings transferred to Australian schemes can be withdrawn when members reach 65 – as per New Zealand KiwiSaver rules.